Recent Papers, Interviews, Videos

Talk at first conference of the International Student Initiative for Pluralism in Economics (www.isipe.net) held in Tuebingen Germany on September 19-21 2014.

Talk covers Minsky, money, complexity, and the economic crisis. Steve says: "I spoke too fast and covered topics at too high a level for many of the undergraduate students who are part of the rebellion against the dominance of economics tuition and research by Neoclassical economics, so I hope putting it up on YouTube gives students a chance to "hit the pause button" and go through my talk more slowly."

Rome Presentation:: Critique of Dynamics in Neoclassical and Post-Keynesian Economics:

What you need to control risky banking behavior is a set of policies that break the link between change in debt and asset prices. And I’ve put forward two ideas and these are post crisis ideas because the crisis itself isn’t addressed by them. One of them is to redefine shares in what I call jubilee shares.

The idea would be at the moment when you buy a share it lasts forever. That enables people to say, buy these shares in this strange company called yahoo, which you can currently buy for 20 bucks and in a years’ time it is guaranteed to be 1000. And of course it goes from 20 to 400 and right back down to 20 once more 4, about the price it is now. And only because there’s no limit to the number of times it can be sold, and therefore it lasts forever,

What I propose is that with jubilee shares, if you bought a share from a company in an IPO, yes it lasts forever, just like it does now. You could sell it someone else but only a defined number of times. My idea, using a biblical idea, is seven times. That gives you enough of price discovery to get a realistic idea of what the company should be priced at. But after the seventh time it lasts 50 years and then it expires. And the idea is that it would take a blithering idiot to borrow money to buy jubilee shares. So you remove the incentive between rising debt levels and asset prices in the share market.

The other policy I call the PILL – property income limited leverage. At the moment if you and I are competing over a house in London somewhere and you and I both had the same amount of income and money saved, and we went to a bank and you got a 95 per cent loan to valuation ratio for your income and I got a 94 per cent you’d get the place. We both have an interest in bidding up the amount the bank will lend to us to buy the house - which is what causes housing price bubbles. So my idea for the pill is that the amount of money that a bank can lend is limited not by the income of the people competing for the house, but the income earning capacity of the house they want to buy. So you and I are both fighting over a place which say could earn 50k pounds a year in rent, then the max that you or I could borrow from a bank is half a million pounds. And then if you wanted to beat me you need to save more of your income then I did. Then you get a negative relationship between house prices and leverage rather than a positive one.

So those two rules alone would mean that the attractiveness of borrowing money to gamble on rising asset prices would not be completely eliminated – you could not eliminate it totally – but would be reduced enough that it would no longer be a problem.